Bank of America’s 2025 Q4 Earnings Call: Contradictions Emerge on Deposit Growth, Funding, and Capital Strategy

Date of Call: Jan 14, 2026

Financials Results

• Revenue: $28.4 billion in total revenue for Q4, up 7% YOY; $10.4 billion from sales/trading/investment banking/asset management fees, up 10% YOY
• EPS: $0.98 per share, up 18% YOY
• Gross Margin: Not explicitly provided; focus on net interest yield of 208 basis points, improved 7 bps QOQ
• Operating Margin: Not explicitly provided; operating leverage of 330 bps in Q4; 2026 guidance of ~200 bps operating leverage

Guidance:

• NII growth of 5%-7% in 2026 vs 2025, driven by core performance and asset repricing.
• Operating leverage of ~200 basis points in 2026.
• Expense growth of ~4% in Q1 2026, with operating leverage expected despite seasonal factors.
• Effective tax rate of ~20% for 2026.
• Consumer deposit growth expected to accelerate from 3% in 2025.
• Loan growth in mid-single digits for 2026, led by commercial but with consumer pickup.
• Net charge-off ratio expected to remain stable near 44 bps.

Business Commentary:

Strong Financial Performance and Revenue Growth:

• Bank of America reported net income of $7.6 billion for the fourth quarter, up 12% from the fourth quarter of 2024, with EPS of $0.98, an increase of 18%.
• The growth was driven by a 10% improvement in net interest income, reaching $15.9 billion on an FTE basis, and overall revenue growth of 7% year-over-year.

Loan and Deposit Growth:

• Average loans grew by 8%, and average deposits increased by 3%.
• This was supported by strong loan growth across consumer and commercial segments and was driven by disciplined expense management and market-based fee growth.

Improved Credit Quality:

• The net charge-off ratio fell to 44 basis points, down 10 basis points year-over-year, with provisions and net charge-offs declining due to stabilization in credit card and lower losses in commercial real estate.
• The improvement in credit quality reflects better underwriting and risk selection, as well as a favorable economic environment.

Global Banking and Wealth Management Performance:

• Global Banking grew average deposits by $71 billion or 13% compared to the fourth quarter of 2024, and Global Wealth & Investment Management added net new assets with a combined consumer of $100 billion.
• The growth is attributed to innovative solutions, relationship management, and strong investment banking fees, which were the highest since 2020.

Operating Leverage and Expense Management:

• The company delivered 330 basis points of operating leverage in the fourth quarter through disciplined expense management, holding headcount flat despite revenue growth.
• This was achieved by offsetting higher wages and benefits with productivity improvements from AI and digitalization, and by investing in revenue-related growth areas.

Sentiment Analysis:

Overall Tone: Positive

• CEO Brian Moynihan stated: 'We delivered on our commitments to shareholders across the year with solid growth across revenue, earnings, and returns.' He described the economy as 'pretty good, decent environment' and said they're 'encouraged and constructive on the year ahead.' CFO Alastair Borthwick noted 'strong quarter' with 7% revenue growth and good operating leverage.

Q&A:

• Question from Betsy Graseck (Morgan Stanley): Is the expense ratio guidance of 55%-59% being adjusted given the accounting changes?
  Response: No adjustment at this time; the recast numbers already incorporate changes, and the range will be reassessed once achieved.

• Question from Ken Usdin (Autonomous Research): With 4% expense growth in Q1, how do you achieve operating leverage given strong fee growth?
  Response: Organic growth with disciplined expense management creates operating leverage; revenue drivers like NII and fees support the model.

• Question from Mike Mayo (Wells Fargo Securities): Update on tech/AI spend and why Erica interactions dipped despite user growth?
  Response: Tech spending up 5%-7%; Erica interaction dip due to increased alerts reducing the need for direct queries, showing digital efficiency gains.

• Question from John McDonald (Truist Securities): Timeline for reducing CET1 ratio towards mid-10s target?
  Response: CET1 ratio will drift down over time via balance sheet growth and buybacks; final rules pending, but ~11.4% currently with buybacks continuing.

• Question from Matt O’Connor (Deutsche Bank): Outlook for sustainable loan growth and drivers?
  Response: Mid-single digit loan growth expected in 2026, led by commercial but with consumer categories picking up, supported by deposit capacity.

• Question from Erika Najarian (UBS): Clarification on expense/efficiency messaging amid peer comparisons?
  Response: Focus on delivering results, not just talk; efficiency ratio improved on recast basis, with revenue mix and headcount driving future leverage.

• Question from Jim Mitchell (Seaport Global Securities): Deposit pricing trends and client behavior post-rate cuts?
  Response: Pricing discipline maintained, especially in corporate/wealth; consumer deposits turning positive, with growth expected to accelerate.

• Question from Chris McGratty (KBW): Funding remix progress and loan growth expectations, plus card yield cap impact?
  Response: $50B-$100B wholesale funding reduction remaining; pushing loan growth everywhere; card yield cap could restrict credit availability, counterproductive to affordability.

• Question from Glenn Schorr (Evercore): Address sluggish deposit growth and outlook for 2026?
  Response: Wealth management balances in off-balance sheet vehicles drove prior declines, now stabilizing; consumer deposits expected to grow 4%-5% in line with GDP.

• Question from Steven Chubak (Wolfe Research): Confidence in GWM organic growth and operating leverage?
  Response: Competitive advantages in client coverage and franchise integration drive organic growth and net new flows, supported by low attrition.

• Question from Gerard Cassidy (RBC): Impact of stablecoin deposit legislation and main risks for 2026?
  Response: Stablecoin deposits may reduce system lending capacity; main risks remain economic downturns, but current momentum and stress testing provide balance.

• Question from Saul Martinez (HSBC): Thoughts on low credit costs and normalization; consumer deposit growth potential?
  Response: Net charge-off ratio of 44 bps below through-the-cycle estimate of 50-55 bps; consumer deposit growth expected around GDP levels, ~4%-5% in 2026.

Contradiction Point 1

Consumer Deposit Growth Outlook

Contradiction on whether consumer deposit growth is expected to be strong or sluggish in 2026.

Why is consumer deposit growth slow despite a strong economy, and do you anticipate a recovery by 2026? - Glenn Schorr (Evercore)

2025Q4: The decline in consumer deposits... has stabilized, and consumer deposit balances are now stable or growing. The company expects consumer deposit growth to align more closely with GDP trends (~4%-5%) in 2026. - Brian Moynihan(CEO)

What factors contribute to the sustained elevation of consumer deposits in the banking system post-pandemic? - Gerard Cassidy (RBC)

2025Q3: The strategy focuses on... gaining share in core transactional accounts... Deposits have grown for many quarters, and there’s no sign of a major outflow. - Brian Moynihan(CEO)

Contradiction Point 2

Capacity to Reduce Wholesale Funding

Contradiction on the remaining capacity to pay down low-cost wholesale funding, which is NIM-accretive.

What remains of the funding opportunity? - Chris McGratty (KBW)

2025Q4: Approximately $50-$100 billion of wholesale funding remains to be reduced as deposit growth allows. - Alastair Borthwick(CFO)

How many quarters of NIM-accretive actions are expected from balance sheet tightening through reducing wholesale funding? - James Mitchell (Seaport Research Partners)

2025Q3: There is still some capacity to pay down low-cost wholesale funding, which is NIM-accretive but not the primary driver. - Alastair Borthwick(CFO)

Contradiction Point 3

Expense Ratio Guidance

Contradiction on the expected trajectory and drivers of the efficiency/expense ratio.

Will you adjust the 55%-59% expense ratio guidance due to the accounting changes in this quarter? - Betsy Graseck (Morgan Stanley)

2025Q4: The expense ratio guidance is not being adjusted at this stage. The numbers already incorporate the recast periods from the accounting change. The guidance represents an ambition... - Alastair Borthwick(CFO)

Will the efficiency ratio return to pre-pandemic levels (just under 60%)? - Gerard Cassidy (RBC)

2025Q2: The efficiency ratio is about 200 bps higher due to changes in tax incentives (clean energy deals). As these deals sunset, the ratio will improve. Additionally, strong NII growth will drive operating leverage, helping to move the efficiency ratio back to the low 60s and potentially below. - Brian Moynihan(CEO)

Contradiction Point 4

NII Growth Trajectory and Drivers

Contradiction on the expected drivers and consistency of NII growth.

Given 4% year-over-year expense growth and strong fee growth in Q1, does this align with your operating leverage goals, and what steps will you take to restore operating leverage to the higher end of the 200-300 bps range? - Ken Usdin (Autonomous Research)

2025Q4: The focus is on organic growth and expense discipline. With NII growth of 5%-7% expected for 2026 and operating leverage of ~200 basis points, revenue drivers like asset management fees, markets, and investment banking will support expenses. - Alastair Borthwick(CFO)

How will factors like accretion roll-off headwinds, rate cuts, loan/deposit growth, and asset repricing impact NII growth next year, given the high base? Can NII grow off Q4's level? - James Mitchell (Seaport Global)

2025Q2: Yes, NII is expected to grow sequentially each quarter, driven by organic growth, fixed rate asset repricing, and continued loan and deposit growth. - Alastair Borthwick(CFO)

Contradiction Point 5

Capital Management and CET1 Ratio Strategy

Contradiction on the approach to managing the CET1 ratio and capital deployment.

What is the timeline for reducing the CET1 ratio from 11.4% to the mid-10s, and the broader strategy for reaching the 16%-18% ROTCE target? - John McDonald (Truist Securities)

2025Q4: The CET1 ratio will decline gradually through balance sheet growth and stock buybacks. The goal is to use excess capital for growth, allowing the ratio to drift down over time. - Alastair Borthwick(CFO)

What CET1 ratio level is acceptable, and is the $4.5 billion buyback sustainable? - Steven Chubak (Wolfe Research)

2025Q1: There is flexibility to increase buybacks further; no specific target CET1 ratio was set. The focus is on growing into the existing capital base. - Alastair Borthwick(CFO)